Customer satisfaction

What are the benefits of satisfied customers?

September 11, 2020
Marc Thomas
Co-founder

Understanding what kinds of benefit a satisfied customer will bring to your business will help you focus your efforts to improve it in your organisation.

We’ve all grown up being told that we should keep customers satisfied, but one important piece of info usually gets left out: what are the benefits if we manage that?

Well, stick with me for a minute and I’ll run through what significant amounts of research confirms. There are many advantages to having satisfied customers including competitive advantage, shorter sales process and higher overall revenue.

Let’s take a look at how this all comes together, now!

Competitive advantage

89% of companies expect to compete mostly on the basis of customer experience, versus 36% four years ago. — Gartner

In no place is it better demonstrated that we’re a competitive species than in the business world. And so, it’s little surprise that we’re all competing to be the most bought, the best reviewed, the most satisfying to customers.

Think of your own business: if you’re not already the most well known business in your industry, wouldn’t you like to be?

There are many ways to get there, sure, but did you know that customer satisfaction is one of the key factors in that battle. In fact, market research firm Gartner runs an annual study of marketing spend.

In 2015, the report identified that just short of 90% of firms expect to be competing on the basis of customer experience (i.e. keeping the customer satisfied).

Access to technology, cheaper products, better branding, they’re all pretty much universally achievable now. But creating a delightful and pleasing experience for customers is tough and requires constant work. So maybe it’s the opportunity you’re looking for to differentiate yourself.    

Create referrals

95% of customers tell others about a bad experience and 87% share good experiences. —Zendesk

Think about the last time you had a bad experience. Maybe you missed a flight and ended up sitting in a boring lounge for hours. Did you tweet about it? 9 out of 10 people in your situation probably would have.

That’s according to Zendesk the customer support software. They studied over 1000 US consumers’ responses to service they had received from a business. What did they find?

52% of people who had bad experiences actively told others that they should stop buying from the company!

On the other hand, according to respondents in the same study, 67% of people who had a good experience actively recommended those services or products to others.

Let’s just think about that for a moment.

If there are two businesses selling the exact same product, one has good customer satisfaction ratings, the other has poor customer satisfaction ratings, there is likely to be a 15% difference in future revenues on the next purchase opportunity alone. This doesn’t even account repeat buying habits by individuals.

That could rack up fast.

An average American, according to American Express research will tell about 17 people when they’ve had a good customer experience.

I hope you’re starting to seeing the bottom line benefits of customer satisfaction.

  • Men tell the most people (21 people) when they have had a poor customer service experience.
  • On average women tell about 10 people when they have had a poor customer service experience.

Reduce Churn

Research by thinkJar says that 67% of consumers cite bad experiences as reason for churn. Churn is one of the saddest metrics to track since it is such an easy but neglected win.

Churn means that a repeat customer (particularly in subscription based businesses) has decided not to continue being a customer. As the thinkJar number states, 2 out of 3 people say that low satisfaction through bad experience is the reason for churn.

Maintaining or increasing customer satisfaction levels is key to ensuring that you don’t lose repeat revenue from customers.

Here’s a sobering stat:

Attracting a new customer is 6-7 times more expensive than retaining a current one. — Salesforce

What would you rather, gross £1000 from retaining a customer with an expenditure of £300 on customer satisfaction (£700 net). Or, would you prefer to pay £1800 to attract a customer at the same gross (-£800 net).

It’s math! And it’s easy.

A quick aside

How is churn calculated?

There are many ways of calculating churn, but here’s a really simple way to calculate it:

The number of customers who churned in the period (excluding any customers who both joined & churned in the period or churned & came back in a period) / Total number of customers at the start of the period.

Example:

If you had 1000 customers at the beginning of the month, and during the month 150 customers churned, 10 came back and 15 bought for the first time, your customer churn rate would be 11.5%: ((150 - 35) / 1000) x 100.

Decreases cost of acquisition

Attracting a new customer is 6-7 times more expensive than retaining a current one. — Salesforce 88% of consumers are influenced by online customer service reviews when making a buying decision. — Zendesk

To really drill the above stats on churn home and turn it around to a positive note: if you’re looking to reduce your cost of acquiring new customers, increasing customer satisfaction is a high leverage way to do this.

88% of consumers are influenced by customer service reviews when buying. That means either this research is wrong or I’m lying to myself about how much I care about reading the reviews of products before buying.

But just how does this work?

Well, consider these two images:

Products without social proof
Products with social proof

Which one are you more likely to choose? The one with reviews or the one without?

If I am thinking about buying, I would always choose a product which tells me that other people have bought it and enjoyed it. It’s just human nature. I don’t want to make a bad choice and then feel foolish.

You can reduce the cost of acquisition by simply displaying some social proof of customer satisfaction. Here are three easy ways to do that:

  1. Ask customers to write a short testimonial – even easier if they want to tweet it from their own account. That way you can embed it on your site and also share it on social media.
  2. Ratings – send our a survey after every major customer touch point asking them to rate your product/business/service on customer satisfaction
  3. Reviews – for individual products, consider asking for reviews after a shipment or install has been completed.

Increases customer lifetime value

"According to the White House Office of Consumer Affairs, on average, loyal customers are worth up to 10 times as much as their first purchase. Some research says that it is 6-7 times more expensive to acquire a new customer than it is to keep a current one."

If you haven’t already been convinced that there’s a benefit to maintaining a high level of customer satisfaction, then let me hit you with another stat: loyal customers are worth up to 10 times as much as their first purchase.

Extrapolating a bit: the above stat from the White House Office of Consumer Affairs says that if I buy £100 worth of product/service from you on the first purchase (not a high amount), then I could be worth up to £1000 in future if you retain my loyalty.

Remember when we talked above about reducing churn?

If you manage to do that successfully, and combine it with increasing loyalty, your cashflow will compound purchase on purchase up to 10x.  

Grows overall revenue

One more insight to leave you with here: people will actually pay more to do business with companies when they’re known for great customer service.

American Express estimates that they will pay 17% more.

For every £100 spent at a company with poor customer service, a company with customer service will earn up to £117.

If you’ve got 1000 customers, that’s really going to add up. It will earn you up to £17K more than your competitor with poor customer satisfaction.

In conclusion

The benefits of creating satisfied customers are simple and numerous:

  1. Create competitive advantage
  2. Create renewals
  3. Reduce churn
  4. Lower the cost of acquisition of new customers
  5. Increase customer lifetime value
  6. Increase overall revenue

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